India reaffirms its stand on tax law changes

United States America,Business/Economy,
Fri, 20 Apr 2012IANS

Washington, April 20 (IANS) India has reasserted its position regarding some retrospective amendments in Indian tax laws saying it was not a case of double taxation, but intended to ensure that companies pay their due taxes.

Indian Finance Minister Pranab Mukherjee clarified the Indian position during a meeting here Thursday with US Treasury Secretary Timothy Geithner when he raised the concerns of US companies that the changes would spoil India's investment climate for them.

A dozen US business groups, including US Chamber of Commerce, the US-India Business Council and the Financial Services Forum had urged Geithner to take up the issue with Mukherjee, who is in Washington for the annual spring meetings of the World Bank and the International Monetary Fund (IMF).

"These proposed amendments will have a significant negative effect on our companies, customers and shareholders, and investors in India," the US business groups wrote in a letter to Geithner.

The tax changes proposed are not substantive but clarificatory in nature as the changes reiterated only the intent of the legislation, Mukherjee said according to Indian embassy officials.

He also pointed out that as per Section 149 of the Income Tax Act, no tax cases can be opened beyond six years. Also tax cases which have already been assessed and finalised up to April 1, 2012 cannot be reopened.

Further the Indian tax laws are very clear that the companies making capital gains from the assets located in India will have to pay taxes either in the country of their origin or in India, Mukherjee told Geithner.

On the issue of categorisation of software sales as royalties, Mukherjee noted that discussions have been held in the past between the tax authorities in both the countries and they had agreed to disagree on such characterisation.

The two leaders also discussed the broad range of global and bilateral macro-economic and financial issues relating to foreign investment and tax matters, officials said.

Mukherjee noted their bilateral relations have evolved in recent years into a global strategic partnership, based on shared values and increasing convergence of interests on regional and global issues.

Indo-US cooperation is growing in all areas, including defence, counter-terrorism, trade, investment, science and technology, education, and energy, he noted.